GDP

GDP, or gross domestic product, is the total value of goods and services newly produced inside a country over a period. It is the standard measure of an economy's size.

The word domestic is doing the work: location matters, not nationality. Output from a foreign company's factory inside the country counts; output from a domestic company's overseas plant does not.

Economists usually watch the growth rate rather than the level. Two consecutive quarters of negative growth is the common shorthand for a recession. GDP divided by population gives GDP per capita, a rough gauge of individual income.

GDP does not capture quality of life, though. Rebuilding after a disaster raises it, while housework and volunteering never appear because no money changes hands. It also says nothing about distribution, so read it alongside other measures. When you see GDP in the news, check whether it is real GDP, adjusted for inflation. Nominal GDP rises on price increases alone, so it cannot tell you whether the economy actually grew.